Did Marx have a labour theory of value?

It was so thoroughly answered by previous generations of economists in the affirmative[12], that it would seem unnecessary even to examine the issue. But David Harvey has recently posted a short article[6] claiming that Marx was an opponent of the labour theory

It is widely believed that Marx adapted the labour theory of value from Ricardo as a founding concept for his studies of capital accumulation. Since the labour theory of value has been generally discredited, it is then often authoritatively stated that Marx s theories are worthless. But nowhere, in fact, did Marx declare his allegiance to the labour theory of value. That theory belonged to Ricardo, who recognized that it was deeply problematic even as he insisted that the question of value was critical to the study of political economy. On the few occasions where Marx comments directly on this matter,1 he refers to value theory and not to the labour theory of value. So what, then, was Marx s distinctive value theory and how does it differ from the labour theory of value?( [6])

It is difficult to take this seriously but as Mike Roberts has done a reply, I probably should do likewise and type a brief response.

Harvey claims that the labour theory of value is generally discredited. But in what sense?

It is correct to say that the theory is not viewed with favour in economics departments, but that is for political reasons – the labour theory of value came, since Gray and Marx, came to be associated with socialism. Since academic economists, in general, did not want to be tainted with the socialist label they were at pains to distance themselves from the theory. But none of them ever adduced any empirical evidence to refute it. It was socially discredited but not empirically refuted.

If one wants to refute a theory about the world you have to show that the theory makes incorrect empirical predictions. Eratosthenes refuted the theory that the Earth was flat and confirmed the theory that it is round by observing that when the sun was overhead in Syene it was at an angle of 7°12′ to the vertical in Alexandria, implying that the earth was curved with a circumference of 25,000 miles. If the earth had been flat the angle of the sun would not have varied as you went north.

The labour theory of value predicts that the prices of commodities will vary proportionately with their labour content. Refuting this should be easy, just show that in fact their prices do not vary with labour content in this way. Did the economists opposed to the labour theory of value do this?

Did they hell, they did not even bother to collect the data to do the tests. So for a century after Marx, the theory was ‘discredited’, but never empirically refuted.

As soon as economists started to collect data to test the theory, which depended on reasonably good economic statistics of whole economies, what did they find?

They found the Ricardo and Marx had been right all along. A whole bunch of studies[18,17,5,13,15,19,1,4,2] since the 1980s have shown that the labour theory of value is very good at predicting prices. Far from being refuted by the evidence, it has been confirmed.

Harvey is like a flat-earther after Erastosthenes, denying the Earth is round on theological grounds.

Harvey next complains that Marx nowhere declares his allegiance to the labour theory of value. True enough, since at the time Marx was writing, that was the only theory going. It simply was the theory of value. It was only afterwards that the alternative marginal utility or neo-classical theory of value was established. After Jevons[8] economists distinguished between the classical or labour theory of value and the neoclassical or marginalist theory of value. But it is ridiculous to expect Marx to have taken sides in a debate that only started after Capital was published(1867). At the time he was writing it was widely accepted that labour was the source of value. Even Jevons the founder of marginalism still accepted that prices were proportional to labour1, thinking that his marginal utility theory gave further support to this time honoured assumption.

Harvey promises to explain what Marx’s theory of value actually is, but nowhere in his article does he do this. That is because it would be impossible to do this without revealing that the theory of value in Marx is identical in all major predictions to that of Ricardo.

What did Ricardo’s theory say?

Did Marx agree with him?

When comparing theorists, especially ones who originally wrote in distinct languages, you should not pay too much attention to the precise vocabulary that they use. What is important is the relations between the concepts they deploy and the relationships that the theorists predict will hold in the real world. When you look at this you see that Marx followed Ricardo’s value theory very closely.

There are 4 key components to their value theory on which both authors agree:

The exchangeable value of commodities varies with their direct labour content2,3.

The indirect labour used to make raw materials and equipment also contribute proportionately to the exchange value4,5.

It is the labour actually expended not the level of pay of the workers that determines value6,7.

The variation of price with labour will be modified by the formation of an equal rate of profit on stock.8,9

The theories are therefore substantially identical in the empirical predictions they make, differing only slightly in terminology. Points 1,2,3 are validated by the empirical data in the studies cited earlier. Point 4 is poorly supported by or refuted by the empirical data [5,19,3] . Marx and Ricardo say the same thing where they are both right and say the same thing where they are both wrong.

So yes Marx has a labour theory of value as Ricardo had. The greater part of this theory is not refuted by the evidence, it is confirmed by it.

This does not mean that Marx made no contributions. Major innovations in his thought were:

The point that labour only gets represented as exchange value in societies with private ownership and atomised production. Marx says exchange was absent in traditional Indian communities or the communism of the Incas. The prior economists had assumed that all societies produce commodities.

The distinction between labour and labour power.

The introduction of the concept of surplus value as something functionally prior to the division of surplus value between profit, interest and rent.

A new theory to explain the falling rate of profit.

A repudiation of Say’s law.

The concept of absolute ground rent.

The introduction of more modes of production than the ones Adam Smith recognised.

The idea that the class struggle leads to the dictatorship of the proletariat.

These are all significant innovations that did distinguish him from his predecessors. There is no need to pretend innovation by Marx in value theory, a topic where he just rigorously used Ricardo’s concepts.

But what about abstract/concrete labour?

Was this distinction not an innovation on Marx’s part?

Well the specific phrase ‘concrete labour’ was different, but the relevant conceptual distinction between the two was present in Adam Smith’s work.

Smith simply uses the term ‘labour’ unqualified where Marx sometimes says abstract labour10. Smith specifically says that when he is talking of labour in this way he is talking of labour in the abstract11. When Smith discusses the division of labour, he is discussing the division of the abstract labour into what he terms ‘varieties’ of labour12 or ‘sorts’ of labour13. This is the same distinction that Marx is making when, using the slightly different term, he talks of abstracting from concrete labours or kinds of labour14.

In tabular form we have:

Smith

Marx

variety, kind, palpable

kind, concrete

labour, abstract

abstract-labour

The same conceptual distinction is being made here between the different kinds of activities into which the labour is divided, and labour in the abstract, or the abstract notion of labour.

William Stanley Jevons. Brief account of a general mathematical theory of political economy, by william stanley jevons journal of the royal statistical society, london, xxix (june 1866), pp. 282-87.Journal of the Royal Statistical Society, 29:282-87, 1866.

Footnotes:

“thus we have proved that commodities will exchange in any market in the ratio of the quantities produced by the same quantity of labour.” ([7]page 187)

2“If the quantity of labour realized in commodities, regulate their exchangeable value, every increase of the quantity of labour must augment the value of that commodity on which it is exercised, as every diminution must lower it.” [14]Chap. 1 , Sec. 1

3“If we consider commodities as values, we consider them exclusively under the single aspect of realized, fixed, or, if you like, crystallized social labour. In this respect they can differ only by representing greater or smaller quantities of labour, as, for example, a greater amount of labour may be worked up in a silken handkerchief than in a brick. But how does one measure quantities of labour? By the time the labour lasts, in measuring the labour by the hour, the day, etc. Of course, to apply this measure, all sorts of labour are reduced to average or simple labour as their unit. We arrive, therefore, at this conclusion. A commodity has a value, because it is a crystallization of social labour. The greatness of its value, or its relative value, depends upon the greater or less amount of that social substance contained in it; that is to say, on the relative mass of labour necessary for its production. The relative values of commodities are, therefore, determined by the respective quantities or amounts of labour, worked up, realized, fixed in them. The correlative quantities of commodities which can be produced in the same time of labour are equal. Or the value of one commodity is to the value of another commodity as the quantity of labour fixed in the one is to the quantity of labour fixed in the other.” ([9], Sec. VI)

4“Not only the labour applied immediately to commodities affect their value, but the labour also which is bestowed on the implements, tools, and buildings, with which much labour is assisted”[14]Chap. 1 Sec. 2

5“In calculating the exchangeable value of a commodity we must add to the quantity of labour previously worked up in the raw material of the commodity, and the labour bestowed on the implements, tools, machinery, and buildings, with which such labour is assisted.”(Marx op. cit)

6See Ricardo’s criticism of Adam Smith for confusing the labour content of commodities for the labour that a commodity will exchange against.

7The whole argument of [9] is devoted to showing that trades unions can raise wages and raise the wage share and that such rises in wages will not simply result in higher prices.

“A use value, or useful article, therefore, has value only because human labour in the abstract has been embodied or materialised in it. How, then, is the magnitude of this value to be measured? Plainly, by the quantity of the value-creating substance, the labour, contained in the article. The quantity of labour, however, is measured by its duration, and labour time in its turn finds its standard in weeks, days, and hours.”([10], page 23 MIA pdf version)

“The greater part of people, too, understand what is means by a quantity of a particular commodity, than by a quantity of labour. The one is a plain palpable object; the other an abstract notion, which though it can be made sufficiently intelligible, is not altogether so natural and obvious.” ([16], page 23 Kindle edition)

“What a variety of labour, too, is necessary in order to produce the tools of the meanest of theose workmen! To say nothing of such compicated machines as the ship of the sailr, the mill of the fuller, or even the loom of the weaver, let us consider only what a variety of labour is requisite in order to form tat very simple machine, the shears with which the shepherd clips the wool. The miner, the builder of the furnace for smelting the ore, the feller of the timber, the burner of the charcoal to be made use of in the smelting-house, the brickmaker, the bricklayer, the workmen who attend the furnace, the millwright, the forger the smith, must all of them join their different arts in order to produce them.” .([16], page 12-13 Kindle edition)

“The spinner is almost always a distinct person from the weaver; but the ploughman, the harrower, the sower of the seed, and the reaper of the corn, are often the same. The occasions for those different sorts of labour returning with the different seasons of the year, it is impossible that one man should be constantly employed in any one of them. This impossibility of making so complet and entire a separation of all the different branches of labour employed in agriculture, is perhaps the reason why the improvement of the productive powers of labour, in this art, does not always keep pace with their improvement in manufactures.”[16], page 9-10 Kindle edition)

14“If then we leave out of consideration the use value of commodities, they have only one common property left, that of being products of labour. But even the product of labour itself has undergone a change in our hands. If we make abstraction from its use value, we make abstraction at the same time from the material elements and shapes that make the product a use value; we see in it no longer a table, a house, yarn, or any other useful thing. Its existence as a material thing is put out of sight. Neither can it any longer be regarded as the product of the labour of the joiner, the mason, the spinner, or of any other definite kind of productive labour. Along with the useful qualities of the products themselves, we put out of sight both the useful character of the various kinds of labour embodied in them, and the concrete forms of that labour; there is nothing left but what is common to them all; all are reduced to one and the same sort of labour, human labour in the abstract.”([10], page 28 MIA pdf version)

The theory of value is the most fundamental in socialism. Whatever may be the deficiencies of David Harvey’s exposition of his understanding of value, or for that matter of Marx himself, I seemed to detect a current of feeling that wanted to excommunicate him ( Harvey, that is, but maybe Marx too) from the ranks of Marxism as if socialism were some sacred church of scriptural marxology.

A case in point is Arthur’s comment( on Michael Robert’s blog) that ”I find David Harvey difficult to take seriously as he is an advocate of “zero growth”. This was especially puzzling as he did seem to grasp some aspects of Marx that were widely misunderstood eg theory of rent, perhaps because of background in geography. But it is quite impossible to understand Marx and not see that he wants to unleash the productive forces.”

I can quite understand how Arthur would come to such a conclusion: there can be little doubt that Marx envisaged a great increase in the production of use values under socialism. Having said that, I do not think we can understand Marx as arguing that the abolition of the fetters imposed by capitalist relations of production thus leads to the untrammelled expansion of the forces of production, which creates the economic prerequisites for the subsequent foundation of socialism. Such a view of socialism was at the basis of the Trotsky/Stalin debate in Russia and later in China between Mao and Deng: all the talk of ”building” or ”constructing” communism, so redolent of the gigantic undertakings of Five Year Plans and the transformation of nature. Already by 1870 Marx had argued that the English proletariat had all the material necessary for revolution, just that they lacked a revolutionary spirit. How much more then is that true today! The planet can no longer sustain the capitalist mode of production. Harvey is absolutely right to advocate ‘zero growth’. The fetters of capitalism render this impossible; capital is indeed self-expanding, which is why the socialist revolution is more necessary than ever. Marx was an economic determinist, not an economic reductionist. So even if Arthur’s understanding of Marx is partially correct, that does not invalidate Harvey’s position today. A number of Marxists have demonstrated how Marx came to refine his theories in the light of further and deeper investigation. Saito writes ( 2017 ”Karl Marx’s Ecosocialism”), ”his critique of capitalism became steadily more ecological with each passing year…

”Marx’s theory of value also demonstrates that capital contradicts the fundamental limitedness of natural forces and resources because of its drive towards infinite self-valorisation.

”Marx did not answer all questions and did not predict today’s world……Careful examination of Marx’s excerpt notebooks is not minor ‘philological’ work, and that analysis will lead to unknown dimensions of Marx’s critique” (pp256-265).

The production forces theory of socialism is an absolute travesty of Marx’s thinking. Harvey is right: we need zero growth, whatever may have been the case 150 years ago. In fact I would argue that the modern Communist Manifesto should include in its programme the demand for strict rationing. Of course such would not be popular in the short term , but we will persuade no-one with the pinko-liberalist popularism of the now defunct socialist and communist parties. Many including myself will have to accept a much lower standard of living if the is to survive.

Reproduction is what Marx is analysing. The difficulty lies in determining the new socially necessary labour time, when reevaluation takes place. As I understand the matter the revaluation must be defined against the historic cost of the capital advanced, otherwise it would be impossible to calculate the extent of devaluation, and the revaluation would be retrospectively without a cut off time. The common answer is that the new value is determined by the current costs of production, but are these the replacement costs of the inputs or the average costs incurred by all producers in the same sphere. Marx remarks, ” the value of each individual commodity in a particular sphere of production is determined by the total mass of social labour time required by the total mass of the commodities of this particular sphere of social production ( Theory of Surplus Value Part 2 Pp 205-206). But as Boffy notes above on ( Michael Robert’s Blog), the question is a decidedly complicated one :” the question of market value, of what actually constitutes socially necessary value creating labour.”

At any rate we can readily appreciate the absurdity of the marginalists’ favourite trope of ‘ a glass of water in the desert.’ How can it be REPRODUCED, except by magic? How did it even get there in the first place. Was it delivered on a flying carpet?!?

Boffy has criticised my comments: ”The question of a cut-off does not arise, because the average socially necessary labour-time is continually being calculated, in the background, as an average of all of the abstract labour-time that has been required to produce all of the commodities of a particular class, and all combined, at the particular time. The labour-time actually consumed in the production of some of the components (e.g. constant capital) forms part of that calculation of the current value, but does not determine the value of that consumed component, whose value is determined by its current reproduction cost.”

I have also gained a lot of insight from Alan Freeman’s writings, accessed above from Michael’s link.

”
The argument itself contains the clue to its own refutation. As is well-known from Chapter 10 of Volume III of Capital, the market value of the yarn will not sink to that determined by the cheapest available process of production but to an intermediate value, between the individual value of those producers who have just purchased their cotton and the individual value of those producers who are still using up old stocks. Therefore, although the value transferred by the cotton has sunk below its original value, it has by no means sunk to the individual value of the producers now entering the market with stocks of new, cheap cotton. It is neither equal to its replacement cost, nor to its original historic cost, but to some intermediate value, dependent on the relative weight in the market of the producers buying new cotton and the producers using old cotton – and hence in turn dependent in the quantity of new cotton on the market, in comparison with the size of the stocks of the old cotton. The difficulty, therefore, is how to determine this intermediate value.”

”The three bad abstractions of TSSI theorists are complementary and mutually reinforcing: (1) they falsely separate value from its necessary form of appearance, exchange-value (money), (2) they falsely separate Marx’s exposition of the magnitude of value from his exposition of the value-form, and (3) they falsely separate production from distribution. TSSI’s bad abstractions are reminders of how difficult it is to get free of Verstand thinking, or what Marx called “the bourgeois horizon.”

Thus Patrick Murray, ”Avoiding Bad Abstractions”. I quickly read through his piece, which I really enjoyed. Not sure though if the TSSI theorists would accept his strictures.

Anyway, take point (1): If from a hen-run I supply eggs to a corner shop, which is put out of business by a new supermarket, do the eggs now have no value because they cannot command a price? All will agree that they still have a use-value. But this is not the end of the story. I might arrange to exchange them with others who produce fruit or vegetables on private allotments, but what will determine the ratio at which the goods are exchanged but the labour-time necessary for their production? I should not continually exchange a kilo of eggs for a kilo of potatoes.

Thus I would argue that value is not only conceptually but also practically antecedent to exchange.

ucanbpolitical Says:
April 18, 2018 at 3:10 pm
”Yes, we have to be careful with Marx’s use of abstraction. Only in chapter 10 does Marx introduce the relevance of weighted averages, today called the median average, to replace simple average. Here is the easiest example I can give of the difference between the two. Assume 3 individual producers. The individual labour times are given as 6, 8 and 10. The simple average here is 8 or 6+8+10 divided by 3. Now let us add in the volume or weight of production each is responsible and give it as 25, 15, and 10 respectively giving a total of 50 meters. Total labour time is (25 x 6) + (15 x 8) + (10 x 10) or 150 + 120 + 100 = 370. So 50 meters takes 370 hours to produce. One meter therefore takes 7.4 hours. This is the market value of one meter of cloth that sets its market price not the individual values. Nor is it the 8 hours which a simple average yields. Why? 8 hours times 50 meters yields 400 hours of labour time. But only 370 hours has been expended in the industry. This is the importance of weighted averages because 7.4 hours time 50 metres equals 370 hours. You are not the only one confused by the distinction between simple and weighted averages. It is not clear even in volume 3, chapter 10 where Marx uses the expression a preponderance of lower or a preponderance of higher cost produces.

Marx avoided using weighted averages for as long as he kept all capitals average (abstract). Weighted averages implies capitals of differing productivity, hence capitals different to each other. Market value is the first transformation of values into prices such that prices differ from individual values. I have read Arthur’s comment below with interest and will follow the link to Mosely whom I respect but who I believe got the transformation solution wrong.”

Ucanpolitical’s exposition of my suggestion that commodities have an individual, an average and a weighted or social value